USS Pensions advice

Ygraine1 · 5 June 2018 at 9:09PM

I am 60, I want to retire in 2 years. My latest USS statement says I will have an income of £15800 at 65. I also pay AVCs which according to USS will give me £430 per year for every year saved from April 2017. My tax free lump sum is £47500. I divorced in 2015 and have been awarded £2800 per annum of my exes pension.

If I retire from my uni job at 62 rather than 65 and alter the USS modeller accordingly, does it show the actuarial reduction of what I will receive? If not, how can I find this out?

If I pay extra into the income investor every month will I get all of this tax free on retirement? I have some savings and was planning to live on these in my last year of work and save as much of my salary as I can to gain the tax benefit but it only seems worthwhile if It is tax free later. Am I right here?

Is there anything else I can do to maximise my retirement income?

Many thanks for any advice pensions savvy USS members can offer. Im a bit numerically challenged but determined to slog my way through the complexities... Y

bluenose1 · 6 June 2018 at 6:59PM

Ygraine1 wrote: »

I am 60, I want to retire in 2 years. My latest USS statement says I will have an income of £15800 at 65. I also pay AVCs which according to USS will give me £430 per year for every year saved from April 2017. My tax free lump sum is £47500. I divorced in 2015 and have been awarded £2800 per annum of my exes pension.

If I retire from my uni job at 62 rather than 65 and alter the USS modeller accordingly, does it show the actuarial reduction of what I will receive? If not, how can I find this out?
Not sure, contact the USS Helpline.

If I pay extra into the income investor every month will I get all of this tax free on retirement? I have some savings and was planning to live on these in my last year of work and save as much of my salary as I can to gain the tax benefit but it only seems worthwhile if It is tax free later. Am I right here?
The first 25% will definitely be tax free and for the years you are living off your savings if you have no other income you will also get up to the Personal Allowance before tax is paid. Worth doing even if you do pay tax on some of it because with salary sacrifice you are saving the 12% NI Contributions. I don't think the USS modeller factors in the NI savings.

Is there anything else I can do to maximise my retirement income?
I would pay as much of my earnings as I could as Kidsmugsy explained to me
That's especially valuable if it were to let you retire early and draw out that £100 tax-free. But even if not you could look at it this way:

£25 comes out tax-free. If you assume that everything will have kept up with inflation - both the pension money and the £68 you would otherwise have retained - then the cost to you is £68 less £25 = £43. That has left you with a fund of £75 which will be taxable at 20% if tax rates stay the same. £75 x 0.8 = £60 which is 40% bigger than £43 it cost you.

Many thanks for any advice pensions savvy USS members can offer. Im a bit numerically challenged but determined to slog my way through the complexities... Y

It is a minefield, it has took me ages to realise the benefit of increasing my contributions significantly. Good luck

swindiff · 14 June 2018 at 7:24PM

Ygraine1 wrote: »

If I retire from my uni job at 62 rather than 65 and alter the USS modeller accordingly, does it show the actuarial reduction of what I will receive? If not, how can I find this out?

The modeller does show benefits with actuarial reductions included. I asked this question of them recently and got this reply today.

"For the modeller it does account for early retirement reductions. It does make some estimates around the Barber splits which can make a small difference, it is accurate but not to the penny if that makes sense. If the member is a few years away from retirement this will be fine but if they are considering an imminent retirement I’d encourage them to get a full quote"

PJM_62 · 12 November 2020 at 5:34PM

bluenose1 said:

Is there anything else I can do to maximise my retirement income?
I would pay as much of my earnings as I could as Kidsmugsy explained to me
That's especially valuable if it were to let you retire early and draw out that £100 tax-free. But even if not you could look at it this way:
£25 comes out tax-free. If you assume that everything will have kept up with inflation - both the pension money and the £68 you would otherwise have retained - then the cost to you is £68 less £25 = £43. That has left you with a fund of £75 which will be taxable at 20% if tax rates stay the same. £75 x 0.8 = £60 which is 40% bigger than £43 it cost you.

It is a minefield, it has took me ages to realise the benefit of increasing my contributions significantly. Good luck

Covid has got in the way of my plans to retire early from USS at end of the year, age 55. I'm now going to wait a year until hopefully life is a bit more normal.
So for the next year I'm wondering whether to put at least 2k of pay each month into my ISA, or straight from pay into pension (with salary sacrifice).
@bluenose1 Your comment above would suggest its much much better to increase contributions to the DC Investment Builder pot. But I'm afraid I didnt understand the calcs. Sorry

Could you explain the difference between 24k (12x2) into ISA , or into pension (with SS).
I'm presuming its to do with paying income tax on the money headed for the ISA, compared to putting it in pension and getting it out tax free in the future ?? As you said its a minefield. And I'm still waiting for the penny to drop

After one more year, my DB will pay about 8k (+ 3x TFLS) , plus I currently have about 80k each in both DC and ISA. I just want to do the most efficient thing in this last year or so, saving as much as I can.

Dazed_and_C0nfused · 12 November 2020 at 6:08PM

If you add £24k into an ISA you have to hand over £24k to the ISA company.

If you want your employer to take £24k of your wages and add them to your pension fund (as salary sacrificed employer contributions) then your taxable (and NIC'able) income is reduced by £24k.

As there is no pension tax relief with salary sacrifice you pension fund has £24k in it but your take home pay isn't £24k less as you have avoided paying tax and NIC on some or all of that £24k. The precise tax/NIC benefit will entirely depend on what you are dropping your salary from and heat other taxable income you have in the same tax year.

Could be simple, if you earn £80k and drop to £55k then you have avoided 40% tax and 2% NIC.

If you drop from £40k to £15k you have avoided 20% tax and 12% NIC.

Suseka97 · 12 November 2020 at 11:20PM

The USS modeller is pretty good and will definitely give you a ballpark figure of the 'standard allocation' - from memory, that's what you see at the front end. But there is a way to look further into the modeller and play around with increasing, or decreasing, your annual pension and/or lump sum payment too.
As has been said, you are entitled to a free pension quote once a year - so you could ask them to give you a quote based on a particular retirement age/year and they will include your entitlements related to the income builder element.
Have a chat with your pension administrator in the first instance.

USS Pensions advice

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